The record inflation of 9.1% in the eurozone puts pressure on the ECB before the next rate hike
Inflation in the eurozone climbed two tenths in August and stood at 9.1% in annual rate, setting a new record, according to preliminary data published yesterday by the Eurostat community statistics office. The rate more than quadruples the medium-term price stability objective established by the European Central Bank, of 2%, and puts pressure on the ECB in the face of the rise in interest rates that the organization plans to adopt at its meeting on 8 September. The Governing Council of the ECB decided on a 50-point rate hike on July 21 – the first in 11 years – and analysts are debating whether next week’s hike will be another half percentage point or 75 points basics.
August becomes the month with the highest year-on-year inflation so far this year, after prices increased by 5.1% in January, 5.9% in February, 7.4% in March and April and the 8.1% in May, 8.6% in June and 8.9% in July. Core inflation, which excludes energy and fresh food for having more volatile prices, stood at 4.3% last month, which is equivalent to a growth of three tenths compared to July.
Energy repeated in the eighth month of the year as the main factor in the increase in prices, with an annual growth rate of 38.3%, which, however, is lower than that of July (39.6%) and especially the peak of 44% observed in March. For its part, the price of processed foods, alcohol and tobacco increased by 10.5% (compared to 9.4% in May), while that of unprocessed foods decreased slightly, from 11.1% from July to 10.9% in August. The price of non-energy industrial goods increased five tenths, up to 5%, while the increase in the price of services was one tenth less this month than the previous one (3.8% compared to 3.7% in May).
In the month of August, nine of the nineteen countries in the euro zone registered double-digit inflation rates, with the highest price increases in Estonia (25.2%), Lithuania (21.1%) and Latvia (20, 8%). The group of countries with double-digit inflation is completed by the Netherlands (13.6%), Slovakia (13.3%), Slovenia (11.5%), Greece (11.1%), Belgium (10.5 %). Spain, with a harmonized rate of 10.3% –10.4% in non-harmonized terms–, shows the ninth highest rate among the 19 countries of the euro zone. The cost of living granted a slight truce last month in the country – four tenths below July – due to the slight drop in fuel prices, which partially offset the persistent increase in the cost of electricity, food, restaurants and tourist packages.
Below this threshold but above the euro zone average are Cyprus (9.6%), Portugal (9.4%) and Austria (9.2%). Lastly, seven common currency countries had inflation below average in August. These are Italy (9%), Ireland (8.9%), Germany (8.8%), Luxembourg (8.6%), Finland (7.6%), Malta (7.1%) and France (6.5%).
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